The Role of an Imitating Firm in a Dynamic Context

Francisco Martínez-Sánchez

Lecturas de Economía, 2007, issue 67, 225-240

Abstract: We analyze the effects of an imitating firm on the behavior of the innovating firm. The framework of analysis used is a dynamic duopoly model of vertical product differentiation, where both the innovator and the imitator compete simultaneously in price and quality. We obtain that when the market is small, the presence of an imitator encourages the innovator to increase its innovating process, so the entry of the imitator should not be obstructed; and, when the market is large, the imitator reduces the innovator’s incentives to invest its economic resources in R&D and to provide a higher quality, so the entry of the imitator should not be encouraged.

Keywords: Leader; Imitator; Quality; Differentiation of Product; Consumer (search for similar items in EconPapers)
JEL-codes: L11 L13 L15 (search for similar items in EconPapers)
Date: 2007
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